Oct. 16 (Bloomberg) -- Venezuelan President Hugo Chavez's government will be able to avert a devaluation of the currency this year and next as a surge in the price of oil swells the nation's reserves, according to a report by Citigroup Inc.

The chance of currency devaluation has declined to 25 percent by January, even as the difference between the government-set exchange rate and the currency in the so-called parallel market widens, Citigroup economist Tania Reif said in a note today. Reif forecast in January that the government would be forced to weaken the bolivar by about 25 percent in 2008 unless it trimmed spending and contained inflation.

Oil accounts for about 90 percent of Venezuela's exports. The country is the fifth-biggest member in the Organization of Petroleum Exporting Countries. Crude oil rose to a record near $88 a barrel today on concern Turkey may attack Kurdish militants in Iraq and disrupt oil shipments.

The difference between the official and parallel exchange rates may ``ameliorate significantly'' if the government increases sales of U.S. dollar-denominated bonds in the local markets, she said. By offering dollar bonds, the government meets demand for foreign currency instruments by investors who shun the local currency because of accelerating inflation.

Venezuela pegs the bolivar at the official exchange rate of 2,150 bolivars under restrictions imposed in February 2003. Venezuelans turn to unregulated markets when they can't get approval from the government's Foreign Exchange Administration Commission to buy dollars at the official exchange rate.

The bolivar fell 0.9 percent to 5,600 bolivars per U.S. dollar in the parallel, unregulated currency markets, from 5,550 on Oct. 11, according to traders. The bolivar has fallen 39 percent this year.

Crude oil for November delivery rose as much as $1.84, or 2.1 percent, to $87.97 a barrel in electronic trading on the New York Mercantile Exchange, the highest since the futures were introduced in 1983.

To contact the reporter on this story: Guillermo Parra-Bernal in Sao Paulo at gparra@bloomberg.net

Last Updated: October 16, 2007 08:47 EDT